Nelson v. Republic Iron & Steel Co.

• Decision Date: 22 February 1917
• Docket Number: 4674.
• Citation: 240 F. 285
• Parties: NELSON v. REPUBLIC IRON & STEEL CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

240 F. 285

NELSON v. REPUBLIC IRON & STEEL CO. et al.

No. 4674.

United States Court of Appeals, Eighth Circuit.

February 22, 1917

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

March 18, 1893, the appellant, with others, made to one Azro T Crossley and others a mining lease on 40 acres of land in Itasca county, Minn., for the term of 50 years from and after the 1st day of April, 1893. The indenture evidencing the 'contract, lease and demise' of said premises contained the following provisions which are or may be deemed pertinent in the determination of this case:

'Which premises are leased to the parties of the second part for the purposes of exploring for, mining, taking out and removing therefrom, the merchantable shipping iron ore which is, or which hereafter may be, found in or under said land, together with the right to construct all buildings, make all excavations, openings, ditches, drains, railroads, wagon roads, and other improvements upon said premises which are (. . .) may become necessary or suitable for the mining or removal of iron ore from said premises, with the right, during the existence of this lease, to cut and use the timber found upon the said premises for fuel, and so far also as may be necessary for the construction of buildings required in the operation of any mine or mines on the premises hereby leased, as also the timber necessary for drains, tramway and supports for such mine or mines.

'The party of the first part further agrees that the parties of the second part shall have the right under this agreement to contract with others to work such mine or mines, or any part thereof, or to sub-contract the same, and the use of said land, or any part thereof, for the purpose of mining for iron ore, with the same rights and privileges as are herein granted to the said parties of the second part. The parties of the second part, in consideration of the premises, hereby covenant and agree to and with the parties of the first part, that the parties of the second part will, on or before the twentieth day of April, 1894, July, 1894, October, 1894, and January, 1895, and at the same times in each year after said 1894, during the period hereinbefore stipulated, or during the period this contract continues in force, pay to the said Benjamin F. Nelson for all the iron ore mined and removed from the said land during the three months preceding the first day of the month in which payment is to be made, as aforesaid, at the rate of twenty-five (25) cents per ton, for all iron ore taken out, mined and carried away, each ton to be reckoned at twenty-two hundred and forty (2,240) pounds.

'The parties of the second part further covenant that within one (1) year from the completion of a railroad within four (4) miles of said land, there shall be mined and removed therefrom at least ten thousand (10,000) tons of iron ore, and at least ten thousand (10,000) tons shall be annually thereafter mined and removed therefrom, and in case the said parties of the second part shall not annually remove from the said land the ten thousand tons of ore as above stipulated, the parties of the second part shall pay to said B. F. Nelson a royalty of twenty-five cents per ton on ten thousand tons, which payment shall be made quarterly, as above specified.

'Provided further, that if second parties wish to keep this lease in force after October 1, 1893, they shall on that date pay to said first parties (1,000.00) one thousand and 00/100 dollars, which, together with the (1,000.00) one thousand & 00/100 dollars paid upon the execution of this lease shall apply on the first royalty due under it; failure to pay said (1,000.00) one thousand & 00/100 dollars on October 1, 1893, shall make this lease void. And it is agreed that the date at which royalties shall commence shall not be earlier than January 1, 1894.

'It is mutually understood and agreed that upon the termination of this agreement, whether by the acts of the parties, or either of them or by limitation, the parties of the second part shall have ninety (90) days in which to remove all engines, tools, machinery, railroad tracks and structures erected or placed by said parties on said land but shall not remove or impair any supports placed in the mines, nor any timbers or frame work necessary to the use and maintenance of shafts or other approaches to the mines or tramways within the mines.

'The parties of the second part shall open, use and work the said mines in such manner only as is usual and customary in the skillful and proper mining operations of similar character when conducted by the proprietors themselves on their own lands, and so as not to do, cause or permit any unnecessary or unusual permanent injury to the same, or inconvenience or hindrance in the subsequent operating of the said mine, and in the working of said mines, the parties of the second part shall deposit all earth, rock and other useless material or rubbish at such places and in such manner as will not conflict with or embarrass the future operating of said mines.'

In 1902 appellee Charles A. Smith had acquired the rights of the lessees under this lease. It appears to be conceded, as stated in appellant's brief, that at that time no ore had been removed from the land, and no payments had been made by the lessees except the two payments of $1,000 each, one when the lease was executed and one on October 1, 1893; that the lessees claimed that other payments were not due because a railroad had not yet been completed to within four miles of the land; the lessor claiming that such a railroad had been built. June 2, 1902, a supplemental agreement was entered into between the lessors and Smith in which the following provision appears:

'The first parties also agree that they have not now any claim or demand for rent of said premises or for royalty and will not make any claim for rent of said premises or royalty for the period during which the second party is permitted under this agreement to explore said premises. The first parties further give the second party until July 1, 1903, in which to explore the said premises upon the terms and conditions provided for in said lease.'

June 29, 1903, pursuant to the terms of the latter agreement, Mr. Smith wrote appellant as follows:

'I have so far completed the exploration thereof that I am satisfied there is a mine of merchantable iron ore on said piece or parcel of land. I respectfully notify you that I shall begin to make payments of royalties from and after July 1, 1903. * * * I further respectfully notify you that I claim as a credit upon the first royalties due under said lease from and after July 1st, 1903, the sum of two thousand dollars heretofore paid upon said lease pursuant to the terms thereof.'

It appears further that on July 11, 1904, appellees Blue Ore Mining Company and Fred B. Snyder had acquired from appellee Smith an interest in said lease, and payments were then made on account of minimum royalties provided by the terms thereof. There was at that time a dispute between said Blue Ore Mining Company and Snyder as to the ownership of one-twentieth of the mine. Each claimant, to preserve his rights, for a short time paid a proportionate part of the royalty on the interest in the mine claimed by him. This resulted in overpayments.

After the assignment of the lease to it, the Republic Iron & Steel Company continued to make payments to appellant, before any iron ore was removed from the mine, at the rate of $625 per quarter, as provided by the lease, until July 1, 1909 amounting to $4,375. Thereafter, when ore was mined and removed from said land by the Republic Iron & Steel Company, that company undertook to apply a portion of the royalty theretofore paid to the payment of royalty upon the ore so mined and removed, claiming the former to be advance royalty and subject to such application. Appellant objected thereto, and demanded that the Republic Iron & Steel Company pay royalty at the rate prescribed in the lease for all ore mined and removed in each quarter year, without making any allowance for or deduction on account of royalties already paid by that company and its predecessors in interest, and threatened that, unless payment was made to him in accordance with said demand, he would declare a forfeiture of the lease under its provisions. Accordingly, this suit was brought by the Republic Iron & Steel Company against appellant, the Paxton Mining Company, the Blue Ore Mining Company, Charles A. Smith, and Fred B. Snyder as defendants, to restrain appellant from refusing to allow the application of any royalty, paid under the minimum requirements of said lease in excess of ore mined and removed, upon ore thereafter mined and removed in any quarter year in excess of the minimum requirements of said lease, and from threatening or attempting to enforce a forfeiture of said lease by reason of any such application; further, for the recovery of all sums so paid to him in excess of that to which he is entitled under the terms of said lease, if any such be found, and further that the decree entered herein shall be binding upon the other defendants in the event of the court holding that the plaintiff is not entitled, as against appellant, to apply the sum of $12,500 repaid to him by the Republic Iron & Steel Company. All the other defendants, by their answers, made common cause with complainant, claiming that under a proper construction of the lease in question all payments, made as minimum royalties before the removal of ore, should thereafter be applied as part of the purchase price of ore actually removed. They further claim that, by the form of the receipts accepted, the defendant Nelson had made a practical construction of the lease to...